SFG Australia & IOOF enter into Scheme Implementation Agreement 16 May 2014 SFG Australia Limited is a company listed on the Australian Securities Exchange ASX Code: SFW.
Key transaction terms SFG Australia Limited ( SFGA ) and IOOF Holdings Limited ( IOOF ) have entered into a Scheme Implementation Agreement under which SFGA will merge with IOOF via a Scheme of Arrangement ( Scheme ) SFGA shareholders will be offered 0.104 of an IOOF share for each SFGA share (the "Share Consideration ) which implies a value per SFGA share of $0.90 (based on IOOF's 90 day VWAP 1 of $8.70 to 15 May 2014) IOOF is also making available a cash alternative, subject to a maximum cash component of $100 million in aggregate The proportion of cash consideration received will depend on: a) the proportion of SFGA shareholders that elect to receive cash; and b) calculated based on the VWAP of IOOF shares over the 10 trading days immediately before the Scheme Meeting SFGA shareholders will own ~22% of IOOF's pro-forma issued share capital post-transaction 2 The proposed transaction represents: An implied value per SFGA share of $0.90, equivalent to a market capitalisation for SFGA of $670m 3 An implied premium of 24.6% to SFGA s 90 day VWAP to 15 May 2014 An implied valuation multiple of 18.5x 4 SFGA s underlying net profit after tax for the 12 months ended 31 December 2013 1. VWAP means Volume Weighted Average Price 2. Based on total IOOF shares on issue of 232m and assuming $100m cash consideration paid to SFGA shareholders and 66m new IOOF shares are issued at IOOF s 90 day VWAP of $8.70 to 15 May 2014 3. Based on IOOF's 90 day VWAP of $8.70 to 15 May 2014 and SFGA shares outstanding of 741m including performance rights 4. Based on IOOF s 90 day VWAP of $8.70 to 15 May 2014 1
Key transaction terms (continued) IOOF expects the proposed transaction to deliver significant value to shareholders of both SFGA and IOOF: Expected to generate pre-tax synergies of ~$20m per annum by FY16 IOOF intends to maintain the current SFGA client facing brands, operating model and client proposition Business as usual for SFGA s clients, advisers, accountants and employees Tony Fenning will remain with the combined group as a Senior Advisor. In addition, Tony Fenning, Jim Kilkenny and Sam Gannon, all current Board members of SFGA, have agreed to join a new Advisory Forum which will advise the SFGA businesses following the merger IOOF will finance the maximum $100m of cash through bank facilities IOOF's pro-forma net debt / EBITDA will be 0.4x post-transaction 1 The SFGA Board unanimously recommends 2 that SFGA shareholders vote in favour of the Scheme, and SFGA Directors intend to cause any SFGA shares in which they have a relevant interest to be voted in favour of the Scheme Several SFGA Directors who are also SFGA shareholders, and another SFGA shareholder, have entered into call option deeds giving IOOF the right to purchase, in aggregate, ~16% of the issued share capital in SFGA in certain circumstances. The details of the call option deeds will be disclosed in a notice of change of interests of substantial holder to be lodged by IOOF with the ASX in due course 1. Pro-forma net debt based on consensus 2014 net debt and additional $100m of funding. FY14E EBITDA based on Bloomberg consensus as at 15 May 2014 2. Subject to an independent expert concluding that the proposed transaction is in the best interests of SFGA shareholders and in the absence of any superior proposal 2
Transaction strategic rationale Complementary businesses Enhanced scale Retains the strength of the SFGA model Significant value to SFGA shareholders from combined business Continued oversight by senior SFGA team Natural fit between SFGA's existing capabilities and IOOF Captures revenue across the value chain including advice, portfolio administration, accounting, insurance, SMSF and investment management complemented by access to IOOF's platforms and products SFGA's differentiated advice proposition targeting the HNW and SME client segments complements IOOF's current offering The merger of the businesses is in line with IOOF's long term growth strategy The combined business will be more balanced towards financial advice, representing ~30% of pro-forma revenue Significantly enhances the position of the combined business to become: - The third largest advice business in Australia by Funds Under Advice ("FUA") 1 ; and - One of the largest listed wealth management businesses in Australia The merger with SFGA will increase IOOF s total advisers by 19% to 1,119 advisers Preserves the non-affiliated independence of SFGA's advisers Provides IOOF with brand and capabilities to target HNW and affluent clients Lachlan Partners enhances IOOF s exposure to SMSF clients Opportunity to broaden IOOF s administration and advice proposition, including accounting advice to SME owners SFGA's deep client relationships will be enhanced with access to IOOF's products at improved price points SFGA shareholders will own ~22% of IOOF's pro-forma issued share capital post-transaction 2 Expected to generate pre-tax synergies of ~$20m per annum by FY16 IOOF is an experienced consolidator with a strong track record of successful integration and achievement of synergies Tony Fenning, Jim Kilkenny and Sam Gannon, all current Board members of SFGA, have agreed to join a new Advisory Forum which will advise the SFGA businesses following the merger Advisers will continue to be supported by SFGA's Best Advice team and regional management structure 1. Source: Company filings (FY2013), Money Management top 100 dealer group survey 2013, company website 2. Based on total IOOF shares on issue of 232m and assuming $100m cash consideration paid to SFGA shareholders and 66m new IOOF shares are issued at IOOF s 90 day VWAP of $8.70 to 15 May 2014 3
Combined market position The combined business will be the third largest advice business in Australia by FUA FY13 Funds Under Advice ($bn) 110.0 70.0 101.1 1 60.0 50.0 47.3 45.6 43.3 40.0 35.0 31.9 1 30.0 26.2 20.0 14.6 13.7 1 10.0 0.0 7.7 7.3 AMP CBA SFG Pro- + IOOF NAB Westpac IOOF ANZ Perpetual SFG Centrepoint WHK/crowe forma / PIS howarth 4.1 Centric Source: Company filings (FY13), Money Management top 100 dealer group survey 2013, company website 1. As at 31 March 2014 4
Combined business IOOF (standalone) 1 SFGA (standalone) Combined business 11% 0% 6% 6% 7% 9% 8% 14% $386.6m revenue 49% 12% $134.3m revenue 16% $520.9m revenue 37% 20% 75% 30% Platform Financial Advice Investment Manag. Stockbroking 3 Financial Advice & Portfolio Admin Insurance & Mortgage Broking Platform Investment Manag. Financial Advice 5 Other Estate & trustee Other Portfolio Manag. Stockbroking 4 Other FUMAS 2 of $123.9 billion FUMAS 2 of $30.5 billion FUMAS 2 of $154.4 billion 937 advisers 182 advisers 1,119 advisers Source: Company filings (FY13), broker research, Money Management Top 100 Dealer Group Survey 2013 1. IOOF revenue = gross margin for each business unit + stockbroking gross margin 2. FUMAS Funds Under Management, Administration, Advice and Supervision (data as at 31 March 2014), SFGA has no Funds Under Supervision 3. Financial Advice and Portfolio Administration have been grouped for illustrative purposes 4. Other includes: Stockbroking, Accounting, Other 5. Other includes: Insurance & Mortgage Broking, Accounting, Estate & Trustee, Other 5
Indicative transaction timetable Date Action Late June 2014 First Court Hearing Early July 2014 SFGA dispatch Explanatory Memorandum to SFGA shareholders Early August 2014 Scheme Meeting Early August 2014 Second Court Hearing Early August 2014 Effective Date Mid-to-late August 2014 Implementation Date 6
SFGA overview A unique, high quality financial advice & wealth management firm Leading non-aligned client focused financial advice and end-to-end wealth management firm, listed on the Australian Securities Exchange (ASX: SFW) Unique, national adviser footprint Professional, HNW and SME focused financial advice and accounting business models Fully integrated wealth management advice and implementation services across the client value chain predominantly fee for service Shadforth Financial Group was awarded Money Management Independent Dealer Group of the Year in July 2013 Significant scale, national footprint and industry presence Experienced management team, with strong transaction execution and integration credentials Aligned interests of management, advisers and staff with shareholders 1. Lachlan Partners has offices in Sydney and Melbourne and operate from established Shadforth offices in Brisbane 2. State Manager and Advice Manager manage both Tasmania and South Australia 7
The best advice journey for SFGA SFGA was formed from the merger of strategically aligned organisations committed to making a difference to clients 13 individual practices Creation of Shadforth One brand Corporatised business model Creation of ASX-listed SFG Australia through the merger of Shadforth & Snowball Strategic merger with Lachlan Partners August 2014 Proposal for SFGA to merge with IOOF via a Scheme of Arrangement 2006 2007 2008 2009 2010 2011 2012 2013 2014 Strategic foundations & tuck-ins Creating scale & diversification (WPFG merger) Selective vertical integration Integrated advice business Tuck-ins of Jeena Partners, Life Financial Services, Spencers Accountants, Parkside, W Corp, ITS and Pindi 8
Contemporary business model Integrated advice & implementation services across the entire client value chain Business owners Family office clients HNW clients Affluent clients External Advice Businesses (and their clients) Advice businesses Professional Advice Model Affiliate, Licensed Services B2B Adviser Services Private clients & business owners 46 accountants & 11 financial advisers HNW focus Smaller accounts & corporate solutions 123 employed Advisers & Relationship Managers 16 practices & 43 advisers nationally Adviser Services and Solutions, Platforms & Funds Solutions & Support Best Advice: IP & Best Practice Implementation Solutions & Corporatised Support Services Portfolio Construction & Management Platform Services Insurance Services Stockbroking Corporate Services 9
Disclaimer Presentation is a summary only This presentation contains information in a summary form only and does not purport to be complete and is qualified in its entirety by, and should be read in conjunction with all of the information which SFGA files with the Australian Securities Exchange. This presentation does not purport to provide recommendations or opinions in relation to specific investments or securities and any information or opinions expressed in this presentation are subject to change without notice. SFGA is not under any obligation to update or keep current the information contained within this presentation. Information contained within this presentation may have changed since the date of this presentation. No reliance on this presentation This presentation has been prepared in good faith and with reasonable care. Neither SFGA nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this presentation (including any projections, forecasts, estimates, prospects and returns, and any omissions from this presentation). No liability To the maximum extent permitted by law, SFGA and its respective officers, employees, agents, contractors, advisers and any other person associated with the preparation of this presentation each expressly disclaim and exclude all liability, including without limitation any liability arising from fault or negligence, for any direct, indirect or consequential loss or damage (whether or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns, and any omissions from this presentation) provided in, or omitted from, this presentation or any other written or oral information provided by or on behalf of SFGA. No investment advice This presentation is not intended to be, and should not be considered to be, investment or financial product advice nor a recommendation to invest in SFGA. This presentation has been prepared for general informational purposes only, and has been prepared without reference to your financial circumstances, investment objectives, taxation position or particular needs. The information in this presentation should not be relied upon as the sole basis for any investment decision in relation to the Scheme or otherwise. Investors and any other recipient of this presentation must make its own independent assessment of SFGA after making such investigations and taking such advice as it deems necessary, including consulting with their own legal, tax, business and/or financial advisers in connection with any investment decision. Forward-looking statements Certain statements in this presentation are forward-looking statements that relate to the future. These forward-looking statements are not historical facts, and are based on or involve current beliefs, assumptions, expectations, estimates and projections of SFGA. Such forward-looking are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties, and other important factors which are beyond SFGA's control and could cause the actual results, performance or achievements of SFGA and the combined business to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among other things, general economic conditions, exchange rates, interest rates, the regulatory environment, competitive pressures, selling price and market demand. Other than as required by law, neither SFGA nor any other person gives any representation, assurance or guarantee that the occurrence of the events express or implied in any forward-looking statements in this presentation will actually occur. SFGA shareholders are cautioned about relying on any such forward-looking statements. The forward-looking statements in this presentation reflect views held only at the date of this presentation. SFGA is not under any obligation to update these forward-looking statements as to reflect events or circumstances that arise after publication. Past performance is not an indication of future performance. No offer of securities Nothing in this presentation should be construed as a recommendation of or an offer to sell or a solicitation of an offer to buy or sell securities in SFGA in any jurisdiction (including in the United States). This presentation is not a prospectus and it has not been reviewed or authorised by any regulatory authority in any jurisdiction. This presentation does not constitute an advertisement, invitation or document which contains an invitation to the public in any jurisdiction to enter into or offer to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities in SFGA. 10
SFG Australia Limited Contact details: Tony Fenning Managing Director Level 18, 50 Bridge Street Sydney NSW 2000 Telephone: +61 2 9250 1500 Email: Tony.Fenning@SFGAustralia.com.au Jodene Jackson Investor Relations Level 18, 50 Bridge Street Sydney NSW 2000 Telephone: +61 2 9250 1527 Email: Jodene.Jackson@SFGAustralia.com.au